Category Archives: Scams

Beware “Paid-to-Click” Scams

If only they told us before ASD, and other similar scams, came along.

11/07/2017 11:25 AM EST

The Securities and Exchange Commission is warning investors to beware online “paid-to-click” scams that promise an easy payday by merely purchasing a membership or an advertising product up front and then clicking on a certain number of online ads each day.

The SEC’s investor alert explains that these online advertising programs may have little to no revenues besides membership fees or sales of “ad packs” and may be nothing more than a Ponzi scheme.  The SEC filed an enforcement case that was unsealed last week in federal court in Florida, alleging that roughly 99 percent of the purported “profits” paid to earlier investors came directly from the buy-in fees collected from newer investors.  Meanwhile, according to the SEC’s complaint, the alleged perpetrator siphoned several million dollars out of investor funds to purchase a luxury home, automobiles, and private plane charters while also using the money to fund his other businesses.

According to the SEC’s investor alert, online advertising programs also can target those with something to advertise, promising to display a company’s ads on their network or guaranteeing traffic to a website by simply paying a membership fee or buying ad packs.

“Be skeptical if you are offered high returns for buying advertising products or clicking on online ads,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “Some paid-to-click programs are actually Ponzi schemes.”

According to the SEC’s complaint filed against Miami-based Pedro Fort Berbel and his company Fort Marketing Group, they operated fraudulent internet advertising businesses under such names as Fort Ad Pays, The Business Shop, and MLM Shop.  They allegedly solicited investors through online posts and videos claiming they could share in the companies’ profits and earn investment returns as high as 120 percent by purchasing an ad pack for as little as a dollar and clicking on four banner ads per day.  The SEC alleges that Berbel and Fort Marketing Group raised more than $38 million from at least 150,000 investors.

“As alleged in our complaint, these companies had no viable source of revenue besides income from investor membership fees and the sale of ad packs, so this boiled down to an ad packs Ponzi scheme in which the promised investment returns to earlier investors were not possible without using funds from new investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.

The SEC’s complaint charges Berbel and Fort Marketing Group with violating Sections 5(a), 5(c), and 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Securities Exchange Act.  They’re also charged with selling investments that are not registered with the SEC as required under the federal securities laws.  The SEC encourages investors to check the backgrounds of people selling them investments.  A quick search on the SEC’s investor.gov website shows that Berbel and Fort Marketing Group are not registered to sell investments.

The SEC obtained a court-ordered asset freeze against Berbel and his companies.

The SEC’s investigation was conducted by Sajjad Matin, Cecilia Danger, and Margaret Vizzi of the Miami Regional Office and supervised by Jessica Weissman.  The SEC’s litigation will be led by Wilfredo Fernandez and Andrew Schiff.  The SEC appreciates the assistance of the Florida Office of Financial Regulation, Bureau of Financial Investigations.  The investor alert was prepared by M. Owen Donley III and Holly Pal in the SEC’s Office of Investor Education and Advocacy.

Avoid Disaster Frauds

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Wednesday, August 30, 2017

Tips on Avoiding Fraudulent Charitable Contribution Schemes

The National Center for Disaster Fraud reminds the public to be aware of and report any instances of alleged fraudulent activity related to relief operations and funding for victims. Unfortunately, criminals can exploit disasters, such as Hurricane Harvey, for their own gain by sending fraudulent communications through email or social media and by creating phony websites designed to solicit contributions.

Tips should be reported to the National Center for Disaster Fraud at (866) 720-5721. The line is staffed 24 hours a day, seven days a week. Additionally, e-mails can be sent to disaster@leo.gov(link sends e-mail), and information can be faxed to (225) 334-4707.

The U.S. Department of Justice established the National Center for Disaster Fraud to investigate, prosecute, and deter fraud in the wake of Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region. Its mission has expanded to include suspected fraud from any natural or manmade disaster. More than 30 federal, state, and local agencies participate in the National Center for Disaster Fraud, which allows the center to act as a centralized clearinghouse of information related to disaster relief fraud.

The public should remember to perform due diligence before giving contributions to anyone soliciting donations or individuals offering to provide assistance to those affected by the hurricane and tornadoes. Solicitations can originate from social media, e-mails, websites, door-to-door collections, flyers, mailings, telephone calls, and other similar methods.

Before making a donation of any kind, consumers should adhere to certain guidelines, including:

  • Do not respond to any unsolicited (spam) incoming e-mails, including clicking links contained within those messages, because they may contain computer viruses.
  • Be skeptical of individuals representing themselves as members of charitable organizations or officials asking for donations via e-mail or social networking sites.
  • Beware of organizations with copy-cat names similar to but not exactly the same as those of reputable charities.
  • Rather than follow a purported link to a website, verify the legitimacy of nonprofit organizations by utilizing various Internet-based resources that may assist in confirming the group’s existence and its nonprofit status.
  • Be cautious of e-mails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
  • To ensure contributions are received and used for intended purposes, make contributions directly to known organizations rather than relying on others to make the donation on your behalf.
  • Do not be pressured into making contributions; reputable charities do not use such tactics.
  • Be aware of whom you are dealing with when providing your personal and financial information. Providing such information may compromise your identity and make you vulnerable to identity theft.
  • Avoid cash donations if possible. Pay by credit card or write a check directly to the charity. Do not make checks payable to individuals.
  • Legitimate charities do not normally solicit donations via money transfer services. Most legitimate charities’ websites end in .org rather than .com.
Component(s):
Press Release Number:
17-953

Just When You Thought You’ve Heard Everything………

Justice News

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Wednesday, October 28, 2015

Seller of “Miracle Mineral Solution” Sentenced to Prison for Marketing Toxic Chemical as a Miracle Cure

A Spokane, Washington, man was sentenced last night to more than four years in federal prison for selling industrial bleach as a miracle cure for numerous diseases and illnesses, including cancer, AIDS, malaria, hepatitis, Lyme disease, asthma and the common cold, the Department of Justice announced today.

Louis Daniel Smith, 45, was sentenced by Chief Judge Rosanna Malouf Peterson of the Eastern District of Washington to serve 51 months in prison to be followed by three years of supervised release.

After a seven-day trial in June, a jury convicted Smith of one count of conspiracy to commit multiple crimes, three counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead and one count of fraudulently smuggling merchandise into the United States.  Evidence at trial showed that Smith operated a business called “Project GreenLife” (PGL) from 2007 to 2011.  PGL sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of sodium chlorite and water.  Sodium chlorite is an industrial chemical used as a pesticide, for hydraulic fracturing and for wastewater treatment.  Sodium chlorite cannot be sold for human consumption, and suppliers of the chemical include a warning sheet stating that it can cause potentially fatal side effects if swallowed.

“Today’s sentence is a just result reflecting the defendant’s role as the leader of a business that sold dangerous chemicals as miracle cures to sick people and their desperate loved ones,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Consumers have the right to expect that the medicines that they purchase are safe and effective.”

The government presented evidence that Smith instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture.  Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications.  Chlorine dioxide is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  Smith provided instructions for use of his product including that nausea, diarrhea and vomiting were all signs that the miracle cure was working.  The instructions also stated that despite a risk of possible brain damage, the product might still be appropriate for pregnant women or infants who were seriously ill.

According to the evidence presented at trial, Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the Food and Drug Administration (FDA) or U.S. Customs and Border Protection.  The government also presented evidence that Smith hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants.

Before trial, three of Smith’s alleged co-conspirators, Chris Olson, Tammy Olson and Karis DeLong, Smith’s wife, pleaded guilty to introducing misbranded drugs into interstate commerce.  Chris Olson, along with alleged co-conspirators Matthew Darjanny and Joseph Lachnit, testified at trial that Smith was the leader of PGL.

The case was investigated by agents of the FDA’s Office of Criminal Investigations and the U.S. Postal Inspection Service.  The case was prosecuted by Christopher E. Parisi and Timothy T. Finley of the Civil Division’s Consumer Protection Branch in Washington, D.C.

15-1325
Updated October 28, 2015

Robert Craddock: Sentencing Rescheduled

As some of you may recall, Robert Craddock, was criminally charged on two counts of wire fraud forrobert-craddock defrauding British Petroleum (BP) following the oil spill in the Gulf of Mexico. Craddock was a well-known figure in Zeek Rewards and other scams, who possessed a largely self-inflated importance of his opinions and didn’t mind threatening anyone who disagreed with his opinions.

Craddock recently tried to copyright/trademark the word “Scam”, as another indication of his inability to grasp reality.

Craddock submitted falsified documents in a scheme to get money from the Deep Horizon Oil Spill Trust for oil clean up that he never, ever did. A motion made by the government for forfeiture of the ill-gotten moneys resulted in the Court ordering the forfeiture of $117,700.00

Craddock pleaded Guilty to two counts of wire fraud and this guilty plea was accepted by the Court on July 29, 2015. The sentencing hearing previously scheduled for September 14, 2015, has been rescheduled to Monday, October 26, 2015, at 11:00 a.m.

Achieve Community: Judge Issues Order to Show Cause

On June 16th, US Magistrate Judge Shaffer issued 2 Orders to Show Cause, the first was aimed at  “Work with Troy Barnes, Inc.”, “Achieve International, LLC” and the second at Defendant Troy Barnes. These Orders are a result of Barnes failing to appear through counsel at the Status Conference held on June 3rd. Here’s a grab from the first Order:

“The court’s records indicate that neither WWTB’s nor Achieve International’s copies of the Minute Order were returned to the court as undeliverable. The court held the Status Conference on June 3, 2015 at 11:10 a.m. Defendant WWTB and Relief Defendant Achieve International did not appear and have not contacted the court to explain their failure to appear.”

“Accordingly, IT IS ORDERED that Defendant Work With Troy Barnes, Inc. and Relief Defendant Achieve International LLC shall show cause in writing on or before Thursday, July 2, 2015 why a default judgment or other sanctions should not be imposed against them for failure to comply with a court order and the Local Rules of Practice for the United States District Court for the District of Colorado. Defendant Work With Troy Barnes, Inc. and Relief Defendant Achieve International LLC are hereby warned that failure to respond to this Order to Show Cause on or before Tuesday July 2, 2015 may result in a default judgment or other sanctions against them without further notice.”

The second Order issued states:

“The court’s records indicate that Mr. Barnes’s copy of the Minute Order was not returned to the court as undeliverable. The court held the Status Conference on June 3, 2015 at 11:10 a.m. Defendant Barnes did not appear and has not contacted the court to explain his failure to appear.”

“IT IS ORDERED that Defendant Troy A. Barnes shall show cause in writing on or before Thursday, July 2, 2015 why he should not be held in contempt for failure to comply with the court’s order setting the Status Conference.”

Zeek Rewards: NXSystems Files Motion for Partial Relief from June 1st Order

NXSystems is asking the Court to reconsider its June 1st Order “directing NxPay to pay $9,069,446.52zeekrewards to the Receiver within 5 days to be frozen in a segregated account pending final disposition of the dispute.”

The Motion goes on to say that NXSystems has voluntarily turned over around $22 Million dollars to the Receiver, does not have possession of any the claimed additional funds, and are financially unable to meet the Order of the Court.

In order to “comply” with the Court’s Order, they have made arrangements to transfer $1 million dollars to the Receiver’s account today.  Sounds a bit short of $9 million dollars to me, but NXSystems believes it to be “substantial”, and that they still believe there are no funds owed to the receivership. They also say this payment presents a significant financial hardship for them because their business has declined steadily since being associated to the Zeek case and RVG’s wrongdoing.

They included a Declaration from Michael Busher, Chairman of the Board of NXSystems, Inc. in an effort to buttress the Motion for Partial Relief. Additionally, he repeats their interpretation for not owing any more money and that they merely acted as a go-between, that RVG deposited money into an account holder’s account, so they are therefore not the guilty party, RVG is. Good luck with that.

Many more claims are made in this Declaration, which you can read on the Files website, ZeekDoc368-1.

We also have a “Memorandum In Support” of this Motion, stating that NXSystems in incapable of paying the $9 million dollars. It is also on the Files website.

 

Zeek Rewards: Government Motion for Peremptory Trial Setting

In a Motion filed May 15th, the government made a Motion for Peremptory Trial Setting for November 2015. The motion mentions the following:

  • it is approximately one year from Defendants arraignment
  • the amount of data is so large that every page cannot possibly be reviewed; it will be necessary to conduct searches of computerized data
  • Defense counsel is abundantly familiar with the case and has worked for Burks since before the federal criminal investigation
  • Defense counsel was familiar enough with the evidence to negotiate a settlement  between Burks and the SEC in August of 2012, in 3:14-cv-89
  • The discovery is voluminous but not overly complicated; the details of the data are largely immaterial to the conduct set forth in the indictment
  • The conduct took place almost wholly between January 2010 and August 2012; Tin Fulton represented Burks for at least 8 months prior to government’s seizure
  • This case involves an incredible number of victims for whom a Special Master has been appointed by the Court.
  • A speedy trial is also important to preserve the memories of witnesses. Defendant Burks – who is not detained – is incentivized to delay the trial for as long as possible.

Zeek Rewards: Joint Motion to Continue And For Status Hearing

On May 7th, Paul Burks, through his attorney Noel Tin, filed the above Joint Motion which has the following points:

1. Mr. Burks was named in a four-count indictment returned on October 24, 2014. He made his initial appearance on November 13, 2014, at which time he was arraigned. The Court has continued docket call in this matter three times. [Docs. 11, 24, 27]
2. Docket call is currently scheduled for May 18, 2015.
3. The parties agree a further continuance is appropriate for reasons outlined in previous motions to continue. To date, the government has produced over 7.9 million documents to the defense. The government is also in the process of producing an additional 11 terabytes of data. Potential witnesses are numerous and spread over a wide geographic area which includes other countries.
4. Given the amount of discovery involved, the degree of preparation necessary for trial, witness travel and document management issues, the parties further agree that a peremptorily set trial date is necessary.
5. While the parties agree a peremptory setting is necessary, they also disagree on the appropriate length of continuance and trial date. The parties are therefore asking the Court to set this matter for a status hearing which will allow the parties to present their respective positions, after which the Court can peremptorily set this matter for trial.

Not at all surprising, the delays are multiplying; 11 TB of information is extremely mind boggling, especially when one considers how shabby scammers keep records of their miscreant ways. I look forward to the trial, no telling what will be revealed.

 

Zeek Rewards: Orders Granting Defaults and Order to Show Cause

Today we have 2 Orders from Senior Judge Graham C.Mullen, in which he Grants the receiver’s Motionzeekrewards for Default Judgments against Jerry Napier and Trudy Gilmond, and also Orders both individuals to appear and Show Cause why judgment should not be entered. I would guess that neither one will show for this either.


 

ORDER
THIS MATTER is before the Court on the Receiver’s Motion for Default Judgment for Failure to Defend or, in the Alternative, Motion for Order Requiring Jerry Napier to Personally Appear and Show Cause.
For good cause shown, it is ORDERED that the Receiver’s Motion is GRANTED and Defendant Jerry Napier is hereby ORDERED to personally appear in court in the Western District of North Carolina on May 27, 2015 at 11:00 AM and SHOW CAUSE as to why judgment should not be entered against him as requested by the Receiver. If Defendant does not personally appear at such hearing, judgment will be immediately entered against him in the amount of $$2,041,356.19.
SO ORDERED.


ORDER
THIS MATTER is before the Court on the Receiver’s Motion for Default Judgment for Failure to Defend or, in the Alternative, Motion for Order Requiring Trudy Gilmond to Personally Appear and Show Cause.
For good cause shown, it is ORDERED that the Receiver’s Motion is GRANTED and Defendant Trudy Gilmond is hereby ORDERED to personally appear in court in the Western District of North Carolina on May 27, 2015 at 11:00 AM and show cause as to why judgment should not be entered against her as requested by the Receiver. If Defendant does not personally appear at such hearing, judgment will be immediately entered against her and Trudy Gilmond, LLC in the amount of $2,129,522.27.
SO ORDERED.


Zeek Rewards: Receiver Issues First Quarter Status Report for 2015

RECEIVER’S STATUS REPORT FOR THE FIRST QUARTER OF 2015

Here are a few of the high points, you can see the full Report here:

The Receiver currently maintains six bank accounts on behalf of the Receivership Estate for holding Receivership Assets: the “Affiliate Account,” the “Seized Asset Account,” the “Pre-Filing Account,” the “Settlement Account,” the “Withholding Account,” and the “Holdback Account.”

Excluding earned interest and transfers between accounts, the Receiver made the following deposits into these accounts during the first quarter of 2015:

  •  $1,577,043.06 into the Settlement Account from settlements with non-affiliate third parties;
  •  $520,250.00 into the Affiliate Account from payments from various financial institutions relating to previously dishonored cashier’s checks, teller’s checks, official checks, and bank money orders.

As of March 31, 2015, the Receivership Estate held approximately $91.3 million in the Affiliate Account, approximately $89.3 million in the Seized Asset Account, approximately $293,000 in the Pre-Filing Account, approximately $6.3 million in the Settlement Account, $0 in the Withholding Account, and approximately $1.1 million in the Holdback Account.


The Receiver Team is awaiting a ruling on its Motion for an Order Directing NxSystems to Turn Over Receivership Assets and/or Find them in Contempt of the Court’s Order Freezing Receivership Assets regarding the approximately $9 million outstanding.


During the first quarter, the Receiver Team continued litigation against Preferred Merchants and Jaymes Meyer to recover the approximately $4.8 million they improperly transferred and failed to return in violation of the Freeze Order.

One property in the Turks & Caicos Islands has been frozen, and the Court has issued an order directing that it be transferred to the Receiver. The estimated value of this property is believed to be over $2 million. In addition, Mr. Meyer agreed to a lis pendens upon California real property that he purchased with Receivership Assets for over $400,000.


With respect to Solid Trust Pay, the Receiver Team has issued a demand to Solid Trust Pay for approximately $1.6 million in outstanding Receivership Assets and is awaiting additional information from Solid Trust Pay to evaluate its response to the Receiver’s Demand.


Litigation in the SEC Enforcement Action 

The Receiver Team litigated the following matters in the SEC Action:

  • The Receiver Team filed a response brief in the Fourth Circuit Court of Appeals regarding the Belsome movants’ appeal of the striking of attorney charging liens.
  • The Receiver Team continued litigation seeking the return of Receivership Assets from NxSystems.
  • The Receiver’s conflicts counsel filed a Motion for Order to Show Cause or Turn Over Receivership Assets Against Compass Bank.
  • The Receiver team continued litigation to recover Receivership Assets from James Meyer and Preferred Merchants Solutions, LLC.

(emphasis added)

To date, almost 121,000 Affiliate claimants have accepted their claim determinations and have been or will be issued a distribution in the near term. The next distribution date for claimants who have not already received a distribution is April 30, 2015. . However, in excess of 50,000 Affiliate claimants have failed to respond to their claim determinations. Each claimant is required to act further if they would like to receive a distribution from the Receivership Estate. Failure to act further may eventually cause a claimant to forfeit the distribution. 

The Receiver contacted each of the Affiliate claimants who failed to respond to their claim determination to request that such claimants respond to the claim determination by April 15, 2015 and notified them that, pursuant to authority granted by court order, they would be deemed to have accepted their claim determination if they failed to respond by that date.

Approximately 1,800 Affiliates have objected to the claim determination issued by the Receiver Team. The Receiver Team is continuing to address these objections in an effort to resolve such objections before intervention by the Special Master or the Court would be needed. The Receiver Team has been successful in resolving the majority of these objections to date.


Along with the Status Report are 2 Exhibits detailing financial information.  Exhibit A and Exhibit B

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